Australian Supermarket Giants Face Over $1 Billion in Staff Underpayment Costs

SYDNEY – Australia's two largest supermarket chains, Woolworths and Coles, are confronting a combined bill potentially exceeding $1 billion to address historical staff underpayments. This significant financial exposure follows a landmark Federal Court ruling that found the retailers failed to adequately compensate tens of thousands of employees, primarily due to issues with "set-off" arrangements and insufficient record-keeping. The ruling has sent ripples across the Australian retail sector, prompting other major companies to review their payroll practices.

The Federal Court determined that Woolworths and Coles did not maintain accurate records of rosters, overtime, and other entitlements for approximately 30,000 salaried workers, with underpayments stretching back more than a decade. A key issue highlighted by the court was the use of "set-off" arrangements, where a higher base salary was intended to cover various award entitlements like overtime and penalty rates. However, the court found that the supermarkets failed to track actual entitlements, leading to systemic underpayment.

In light of the ruling, Woolworths has flagged potential additional costs exceeding $500 million, including remediation, interest, and superannuation, on top of the $330 million already repaid. Coles estimates its further remediation could range between $150 million and $250 million. These figures, combined with previous repayments, push the total liability for the two giants past the $1 billion mark, as reported by various financial analysts.

The judgment is expected to have wide-ranging implications beyond the supermarket sector. Legal experts and unions suggest it could trigger a wave of new class action lawsuits against other retail and fast-food companies that utilize similar annualised salary and set-off practices. The Retail and Fast Food Workers Union noted that the court's findings on ubiquitous employment contract clauses would "reverberate right across retail."

The Fair Work Ombudsman, which initiated legal action against the supermarkets in 2021, described the judgment as an "important decision" that underscores the need for annualised salaries to meet all employees' minimum lawful entitlements. A case management hearing is scheduled for late October to determine the next steps in the proceedings and the final compensation for affected employees. The complexity of the case suggests a final resolution could take years, with potential appeals still on the horizon.